McFreeze Corp. v. State, Dept. of Revenue
| Decision Date | 25 August 2000 |
| Docket Number | No. 24941-3-II.,24941-3-II. |
| Citation | 6 P.3d 1187,102 Wash. App. 196 |
| Court | Washington Court of Appeals |
| Parties | McFREEZE CORPORATION, and John McCollum and Roberta McCollum, husband and wife, Respondents, v. STATE of Washington, DEPARTMENT OF REVENUE, Appellant. |
Cameron Gordon Comfort, Donald F. Cofer, Asst. Atty's Gen., Olympia, for Appellant.
Richard Patrick Algeo, Spokane, for Respondents.
The McCollums owned 50 percent of the stock in a corporation whose sole asset was a $400,000 piece of realty. After purchasing the other 50 percent of stock, the McCollums attempted to pay excise tax on $200,000, the proportionate value of the realty corresponding to their purchase of 50 percent of the stock. A state statute requires the purchaser of a "controlling interest" in a corporation owning real estate to pay excise tax on "the true and fair value of the real property owned by the [corporation.]" RCW 82.45.030(2). Another statute defines "controlling interest" as "either fifty percent or more of the total ... stock[.]" RCW 82.45.033(1). Under these statutes, the Department of Revenue ("DOR") required the McCollums to pay excise tax on $400,000, the full value of the realty owned by the corporation.
In an action for a tax refund, the trial court granted summary judgment for the McCollums. Finding the statute ambiguous, the court ruled that the McCollums owed tax on $200,000. DOR appeals, arguing that the language of the statute is unambiguous and sets the taxing rate on the full value of the realty owned by the corporation. Although this leads to incongruous results in certain sales, we agree. Accordingly we reverse and remand for entry for summary judgment in favor of DOR.
The McCollums and the Freezes each owned 50 percent interests in McFreeze Corporation. The corporation's only asset was a building worth $400,000.
In 1998, the McCollums purchased the Freezes 50 percent interest in the corporation for $200,000. The McCollums attempted to pay excise tax on this $200,000 ($3,560), but DOR insisted they pay tax on the entire $400,000 value of the real property. They paid the tax and brought a complaint for refund directly in the superior court under RCW 82.32.180.
On cross motions, the court granted summary judgment to the McCollums. In essence, the court found that the real estate excise tax (REET) statute was ambiguous. By looking to the legislative purpose, the court determined the tax should be on only the value obtained by the McCollums ($200,000) rather than on the value of the corporation's entire "real property" asset ($400,000). The court also awarded the McCollums attorney fees under the Equal Access to Justice Act, RCW 4.84.350. DOR appeals both rulings.
I. Real Estate Excise Tax Statute (REET)
We review an order of summary judgment, as well as issues of statutory construction, de novo. Enterprise Leasing, Inc. v. City of Tacoma, 139 Wash.2d 546, 551-52, 988 P.2d 961 (1999); Hadaller v. Port of Chehalis, 97 Wash.App. 750, 754, 986 P.2d 836 (1999). The REET statute states:
RCW 82.45.030. The "controlling interest" of a corporation is defined as "either fifty percent or more of the total combined voting power of all classes of stock of the corporation entitled to vote, or fifty percent of the capital, profits, or beneficial interest in the voting stock of the corporation[.]" RCW 82.45.033(1).
DOR argues that the analysis starts and ends with the plain language of RCW 82.45.030(2).1 Under this analysis, the McCollums purchased a "controlling interest in an entity" (McFreeze) and, therefore, the "selling price" for purposes of taxation is "the true and fair value of the real property owned by" McFreeze (the value of the building, $400,000).
The McCollums argue that the statute is ambiguous, the statutory scheme should be read as a whole and in their (the taxpayer's) favor, and their interpretation fulfills the legislative intent and avoids absurd and incongruous results. They argue the statute requires the tax to be apportioned based upon the percentage of the corporation being purchased. In particular, the McCollums argue RCW 82.45.030(2) must be read in conjunction with RCW 82.45.030(1) and, in so doing, the "ambiguity" in the statute becomes apparent. They argue as follows: (A) RCW 82.45.030(1) sets the "selling price" as total consideration paid in an arm's length transaction (here $200,000); (B) this definition of "selling price" applies to all subsections of RCW 82.45.030; (C) RCW 82.45.030(2) merely ensures that the "selling price" is based upon the corporation's "real property" and does not include any additional assets of the corporation (such as inventory and equipment). To demonstrate the effect of a different interpretation, the McCollums note that if this were simply individuals purchasing the remaining joint interest in a piece of land, sans the corporate shell, the "selling price" under RCW 82.45.030(1) and (2) would only be $200,000. Simply by adding the corporate form, essentially the same transaction results in taxation of twice this amount. Therefore, the McCollums argue, the statute is ambiguous.
A statute is ambiguous if it can be reasonably interpreted in...
To continue reading
Request your trial
-
State v. TEC, 52006-7-I.
...112 S.Ct. 1215, 117 L.Ed.2d 453 (1992). Issues of statutory construction are also reviewed de novo. McFreeze Corp. v. State, Dep't of Revenue, 102 Wash.App. 196, 198, 6 P.3d 1187 (2000). B. Imposition of SSODA The State asserts as a cross-appeal that the trial court abused its discretion wh......
-
BREMERTON PUBLIC SAFETY ASS'N v. City of Bremerton
...(1997). We are not free to disregard the plain meaning of the statute to avoid an incongruous result. McFreeze Corp. v. State, Dept. of Revenue, 102 Wash. App. 196, 201, 6 P.3d 1187 (2000). Thus, when reading an unambiguous statute we look to the wording of the statute, not to outside sourc......
-
Hegwine v. Longview Fibre Co., Inc.
...460. Where a statute uses plain language and defines essential terms, the statute is not ambiguous. McFreeze Corp. v. Dep't of Revenue, 102 Wash.App. 196, 199 n. 1, 6 P.3d 1187 (2000). Thus, we must apply the statute as written if the statutory language is clear; we may not look beyond that......
-
City of Olympia v. Thurston County Bd.
...¶ 19 Where a statute uses plain language and defines essential terms, the statute is not ambiguous. McFreeze Corp. v. Dep't of Revenue, 102 Wash.App. 196, 200, 6 P.3d 1187 (2000). Moreover, if the statutory language is clear, the court may not look beyond that language or consider legislati......